Understanding HMOs…

If you have at least three tenants living in a property and they share a toilet, bathroom or kitchen facility, then the property is a House in Multiple Occupation (HMO). This means that special rules will apply to the property and it may need to be licensed by the council if it has three storeys or more with five or more occupants. Though it should be noted that local authorities do have the power to impose additional HMO Licensing on other, smaller types of HMOs.

There are some exceptions, though…

Certain types of properties are exempt from licensing. Examples include:

• Two-person flat shares, which is a property that is lived in by no more than two ‘households’ each of which consists of one person.
• A property where the landlord and their household lives with up to two tenants
• Buildings occupied entirely by freeholders or long leaseholders

What if I have a flat?

Flats have special provisions and a block of converted self-contained flats will not require an HMO licence, and a block of purpose-built flats can’t be an HMO as a block, but as individual flats can fall into the HMO category.

Does it matter how many occupants live in the property?

Yes, any part of a building that is occupied by two people cannot be an HMO. For the property to meet HMO requirements, there must be at least three people involved.

Is there a simple way of identifying an HMO?

In short, if your property includes the sharing of a toilet, washing and cooking facilities by three or more unrelated people in two or more separate ‘households’, which can be formed by just one person, then it’s likely that the property is an HMO.

If your property is in a block of converted self-contained flats, or mixed accommodation, and there are three unrelated people living there, it can still be an HMO despite there not always being a sharing of the washing and cooking facilities.

New rules for HMO properties

From October 2018, professional landlords investing in HMOs will need their properties to meet a new level of standards:

The new HMO rules are covered by The Licensing of Houses in Multiple Occupation (England) and can be read here. This was agreed by parliament on February 23rd and will come into effect across England this year on the 1 October 2018.

Under the new rules, bedrooms must be a certain size, with double bedrooms being at least 10.22m2 and bedrooms for under 10s at least 4.64m2. If the bedrooms are smaller than this, they cannot be used as sleeping accommodation.

The new rules will also see the definition of an HMO changing, with more landlords needing HMO licences and smaller properties also needing a licence.

Don’t let this put you off if you are thinking of investing into this market – HMOs can still attract higher yields than other types of buy-to-let investment properties and, if you are considering entering the market, using a mortgage broker that has access to a wide panel of specialist lenders is imperative.

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